Are sanctions not working? How Russia gets Western components for its weapons

Strikes on Ukraine's critical infrastructure and active bombing of the front line — in the third year of the great war, Russia has not experienced “shell hunger” to the extent that some analysts predicted. The aggressor's allies, Iran and North Korea are partly helping with this. In some way, there are almost bottomless stocks of Soviet-era missiles produced before 2022. Nevertheless, Russia itself continues to supply its war machine with new high-tech weapons, finding ways to circumvent sanctions that, in theory, should prohibit the import of components and equipment critical to such production.

The Western Pro-Ukrainian coalition is in a paradoxical situation: Ukraine has to be helped with defense equipment to repel Russian attacks, which has been made possible by “gray” imports from Western countries themselves.

Critical dependence of the Russian military-industrial complex

Exports of sanctioned military and dual-use goods from Ukraine's allied countries to Russia have been going on for years. Despite considerable media attention, the volume of imports of some critical components for the enemy military-industrial complex is even growing.

On the one hand, this is yet another confirmation that Russia is largely dependent on foreign supplies, even in its own production, and thus vulnerable. On the other hand, even under collective sanctions, it finds a way to continue these supplies, which is evidence of the vulnerability of Ukraine’s allies.

In a video address on April 14, President Zelenskyy said that in one week, Russia used 130 Shahed kamikaze drones, more than 80 missiles, and nearly 700 guided aerial bombs. The head of state emphasized that Russia still has access to foreign components needed to produce missiles and drones.

Each missile that strikes Ukraine has at least dozens of components — electronics, and chips — that are sourced from companies in other countries and imported through the territory of Russia's neighbors. The Shaheds also contain components produced in the free world.President of Ukraine Volodymyr Zelenskyy

After the full-scale invasion in February 2022, 39 leading manufacturing countries from North America, Europe, and East Asia immediately imposed export controls on a wide range of goods considered critical to the Russian military-industrial complex. At that time, Russia became the country against which the largest number of sanctions were imposed in the world: about 16,000 individuals and companies were subject to international export restrictions. This list continues to grow to this day.

However, strict export controls have not been able to stop the flow of advanced electronics and technology entering Russia through third countries such as Kazakhstan, Turkey, China, and the United Arab Emirates. An investigation by Nikkei Asia found a tenfold increase in semiconductor exports from China to Russia immediately after the start of the full-scale war, most of them from American manufacturers.

In 2023, the National Ukrainian Agency for the Prevention of Corruption created the Unified Electronic Database of Foreign Components in Russian Weapons. The list is updated when experts find new components. For example, in February 2024, the list was updated with chips found in Shahed drones: out of eight new components, five were produced in the United States, three in China, and one in Switzerland.

According to the German newspaper Die Welt, Russia produces 30 Shahed drones every day, and by the end of 2024, the figure could rise to 87 Shaheds per day. But it's not just about UAVs, it's also about more sophisticated weapons, such as missiles, radars, or aircraft, the production of which is even more dependent on Western equipment and components. According to Oleksandr Musienko, head of the Center for Military Legal Studies, the Russian military-industrial complex cannot produce high-precision weapons without Western components.

In fact, 95% of all critical components found in Russian high-precision weapons come from countries that provide military assistance to Ukraine. In addition, 72% of foreign components come from companies based in the United States, according to a report prepared by the Kyiv School of Economics and the International Working Group on Sanctions Against Russia, headed by the head of the Office of the President of Ukraine, Andriy Yermak, and the director of the Freeman Spogli Institute for International Studies, Michael McFaul. However, components from China account for only 4% of the nearly 2,800 important parts.

Dual use

Russia's main loophole is that chips, semiconductors, software, circuit boards, and other components can be used in both the civilian and military sectors. This means that it is not easy to regulate their imports.

“Western-made dual-use goods are important elements of weapons produced in Russia, especially when it comes to missiles,” Oleksandr Musienko said in an interview with hromadske.

Russia is not self-sufficient in missile production and needs imported parts. If Russia were completely cut off from imports of such components, it would be a painful blow to the Russian military-industrial complex.Oleksandr Musienko, Head of the Center for Military Legal Studies

Ukraine has discovered at least 7,500 foreign components in Russian missiles and drones after a massive attack on Ukraine's energy infrastructure on March 22, 2024. A large share of these components are dual-use goods that are widely used in the military industry.

Nevertheless, it is very difficult to completely block the export of dual-use goods to Russia, said the head of the Center for Military Legal Studies.

“The global arms market operates on the principle that if there is demand, there will be supply. There will be those who will help Russia circumvent sanctions even despite the threat of criminal liability,” Musienko said.

This applies not only to equipment and parts but also to critical substances. For example, despite the sanctions, Russia managed to double its imports of nitrocellulose, an explosive needed to produce artillery shells. In 2022, it was imported to Russia by 70% more than in 2021. In 2023, this figure was also higher than before the full-scale invasion.

Nitrocellulose is a dual-use product that is also used in the production of varnishes, paints, and inks. This substance is produced in several countries around the world, including Russia. However, Russia lacks the capacity to meet its military needs, so uninterrupted access to nitrocellulose is provided by circumventing sanctions.

Although the United States and the European Union have banned all exports of nitrocellulose to Russia, the aggressor country continues to receive this scarce substance from companies in America, Germany, and Taiwan. China has also increased its supply of nitrocellulose to Russia.

However, the most common critical component of Russian military equipment is semiconductors. For example, Ukrainian experts have found Western-made chips in every type of Russian equipment. Chinese substitutes for Western semiconductors still lag behind Western products in terms of technological development and quality, so Russia relies on Western-made goods.

Much of the computer components used in Russian ballistic and cruise missiles are purchased for nonmilitary use for the Russian Roskosmos space program.

According to a report by the Kyiv School of Economics and the Yermak-McFaul International Working Group, Russia imported more than $22 billion worth of dual-use goods during the ten months of 2023, from January to October.

In particular, last year, Russia imported a large number of navigation equipment, various sensors, and bearings worth more than $2 billion; car parts worth $5.63 billion; communications equipment worth $3.38 billion; semiconductors worth $2.21 billion; computer parts worth $2.94 billion; and other electronics worth $5.37 billion.

Circumvention of sanctions

In addition to high-tech dual-use components, Russia manages to import large volumes of military goods. According to a report by the KSE and the Yermak-McFall Group, in 2023, imports of military goods to Russia almost completely recovered after the imposition of sanctions, reaching about 90% of the level before the full-scale invasion.

From January to October 2023, Russians imported a staggering $8 billion worth of military goods. Among these purchases, special equipment for weapons production is of great importance.

Despite the sanctions, Russia is actively purchasing computer numerical control (CNC) machines — automated machines that independently execute commands given to them. CNCs are critically important for the production of microelectronics, aircraft bodies, and parts, missiles, and drones. In fact, modern weapons cannot be produced without the use of such equipment.

The European Union has also banned the export of CNC machines to Russia, and even the transit of such equipment through the territory of Russia. Japan, one of the leaders in this sector, has also banned the export of this equipment to Russia.

Well, as you might have guessed, these sanctions did not stop the Russians: according to the aforementioned report by the KSE and the Yermak-McFall Group, in January-October 2023, Russia imported $189 million worth of CNC machines and another $103 million worth of spare parts. This is more than 88% more than before the full-scale invasion.

Manufacturers of CNC equipment are concentrated in a small number of countries. Germany is the world leader in this sector, followed by South Korea, the United States, Japan, China, and Taiwan. It was manufacturers from countries that joined the sanctions against Russia that supplied 97.8% of CNC machines and spare parts to Russia in January-October 2023, mostly through third countries. Most of this equipment is sold and delivered to Russia by companies from China and Turkey.

How does Russia circumvent sanctions and what should be done about it?

Shortly before the full-scale invasion of Ukraine, Russia significantly increased its imports of critical components for the military-industrial complex, presumably as a precautionary measure in case of future procurement problems. After allies imposed export controls, imports did indeed fall by almost 50% between March and June 2022.

However, in the fourth quarter of 2022, imports of critical components even increased by 9.3% compared to the same period in 2021, when Russia was already actively purchasing these goods. At the end of 2022, Russia managed to reformat its supply chains and find an opportunity to obtain Western components by bypassing sanctions.

The most vulnerable point of the sanctions mechanisms is the weak export control over the supply of dual-use and military goods to third countries. If the necessary components cannot be purchased directly, Russia uses neutral countries as a transportation hub, explains American economist Robin Brooks.

This pattern is clearly demonstrated by the significant growth in exports from the EU to Central Asia and the Caucasus. No amount of domestic consumption or previous re-export statistics could explain such a dramatic change in purchases — the conclusion that Russia is playing a role is obvious.

To strengthen control over the export of military and dual-use goods, the authorities of producing countries should promote the improvement of data exchange systems for sensitive trade activities. This involves the exchange of customs data between countries that have joined the sanctions against Russia, as well as third countries that Russia uses to circumvent sanctions.

The Yermak-McFaul Group recommends that governments of countries producing sanctioned goods cooperate closely in investigating possible violations and keep a close eye on any signs of abnormal export growth. Since sanctions evasion tactics often resemble money laundering tactics, the existing legal framework for monitoring these activities could be applied to export control violations. In addition, the introduction of additional sanctions against Russian banks could limit the channels of import payments, which would contribute to stricter export controls.

To effectively counteract sanctions circumvention, among other things, lists of dual-use goods should be agreed upon between countries. This will prevent the misclassification of dual-use goods in customs declarations and reduce the risk of diverting critical components for aggression against Ukraine.

There is already progress. Last week, the Council of Europe decided to criminalize the violation of sanctions on trade with Russia. However, this provision will not come into force immediately, as EU governments must implement it in their national legislation, which will take up to 12 months. In the meantime, the European Union is preparing the fourteenth package of sanctions against Russia, which is largely intended to close Russian procurement loopholes.

It takes time to strengthen sanctions mechanisms. The more Russian loopholes for circumventing sanctions are closed, the more expensive it is for them.Oleksandr Musienko, Head of the Center for Military Legal Studies

Obviously, Russia will not give up trying to find new ways to circumvent sanctions and will continue to look for critical parts for its military machine by all means. Therefore, it is extremely important to keep an eye on this, look for such ways, and block them by cohesively strengthening and improving sanctions mechanisms.